A firm's annual credit sales are $171 million, with 49.56% of its daily average paid out in purchases. It usually takes the company 34 days to meet its purchasing obligations. This payment pattern has not changed in recent years. However, the firm's commitment to accounts receivable has shifted based on its current annual net income of $28.6k which meets the 3.44 % required return, anticipated by senior management a year earlier. Normally, the firm collects its accounts in 23 days, an average which remains unaffected. Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?
A firm's annual credit sales are $171 million, with 49.56% of its daily average paid out in purchases. It usually takes the company 34 days to meet its purchasing obligations. This payment pattern has not changed in recent years. However, the firm's commitment to accounts receivable has shifted based on its current annual net income of $28.6k which meets the 3.44 % required return, anticipated by senior management a year earlier. Normally, the firm collects its accounts in 23 days, an average which remains unaffected. Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 1P
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![A firm's annual credit sales are $171 million, with 49.56% of its daily average paid out in purchases. It usually takes
the company 34 days to meet its purchasing obligations. This payment pattern has not changed in recent years.
However, the firm's commitment to accounts receivable has shifted based on its current annual net income of $28.6k
which meets the 3.44% required return, anticipated by senior management a year earlier. Normally, the firm collects
its accounts in 23 days, an average which remains unaffected.
Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?
Note: The term "k" is used to represent thousands (x $1,000).
% (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F10dcb6ba-aa75-4cdb-883c-7d00a5336f1d%2F92234776-f9a2-49c8-8b93-d1ea6a42f8ae%2F8lzshye_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A firm's annual credit sales are $171 million, with 49.56% of its daily average paid out in purchases. It usually takes
the company 34 days to meet its purchasing obligations. This payment pattern has not changed in recent years.
However, the firm's commitment to accounts receivable has shifted based on its current annual net income of $28.6k
which meets the 3.44% required return, anticipated by senior management a year earlier. Normally, the firm collects
its accounts in 23 days, an average which remains unaffected.
Required: In percentage terms, by how much are the firm's receivables greater (or less) than its payables?
Note: The term "k" is used to represent thousands (x $1,000).
% (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)
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